Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Investing in TMS: An Overview
May 2013
Safe harbor provision
This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, (the “Exchange Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events Such forward-looking statements include the discussions of our businessbeliefs concerning future events. Such forward looking statements include the discussions of our business strategies, estimates of future global steel production, trends toward outsourcing and other market metrics and our expectations concerning future operations, margins, profitability, liquidity and capital resources, among others. Although we believe that such forward-looking statements are reasonable, there can be no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Certain areas of this presentation depict Revenue After Raw Materials Costs, EBITDA and Discretionary Cash Flow, which are non-GAAP financial measures. Revenue After Raw Materials Costs, EBITDA and Discretionary Cash Flow are not and should not be considered alternatives to revenues or net income or any other financial measure under U.S. GAAP. We reconcile these measurements to GAAP in our quarterly and annual reports on forms 10-Q and 10-K, filed with the S.E.C. pursuant to the Exchange Act. Our calculation of Revenue After Raw Materials Costs EBITDA and Discretionary Cash Flow may differ from methods used byRevenue After Raw Materials Costs, EBITDA and Discretionary Cash Flow may differ from methods used by other companies.
When we use the term “North America” in this presentation, we are referring to the United States and Canada; when we use the term “International,” we are referring to countries other than the United States and Canada;
h th t “L ti A i ” f i t M i C t l A i S th A i d thwhen we use the term “Latin America,” we are referring to Mexico, Central America, South America and the Caribbean, including Trinidad & Tobago.
1
Why invest in TMS?
Market-leading global industrial services provider
Significant growth profile
Long-term contracted revenue and variable cost structure
Experienced and proven management team
Superior financial strength and liquidity
Strong cash flow generation drives earnings growth
2
TMS enables steel producers to lower costs and generate operational efficiencies
TMS POST-STEEL MAKING SERVICES
Metal
TMS PRE-STEEL MAKING SERVICES
STEEL PRODUCERSIntegrated/EAF mills Metal
recovery, slag handling, and sales
Raw materials procurement and logistics
Integrated/EAF mills
Material handling
Lowest cost liquid steel handlingqoptimization
Surface conditioning
Scrap management and preparation
MSG (Mill Services Group) RMOG (Raw Material & Optimization Group)
3
TMS’ global footprint and established platform for growth
Revenue after raw materials costs ($MM)
TMS’ Operations / Offices
C t i f ti
2007 $410 LTM $607International revenue (% of total)
2007 7% LTM 26% Countries of operation: Belgium, Brazil, Canada, China, France, Indonesia, Malaysia, Mexico, Poland, Singapore, Slovakia, South Africa, South Korea, Taiwan, Trinidad, U.A.E., United Kingdom, United States, Vietnam
Countries of operation
2007 6 LTM 19Strong North American base and growing international operations demonstrates
the strength and diversity of TMS’ global growth platform.
4LTM - 3/31/2013
TMS – A global growth story
REVENUE AFTER RAW MATERIALS COSTS ($MM) ADJUSTED EBITDA ($MM)
Three factors and trends driving TMS’ growth:
1) Global steel production growing
2) Increased demand for outsourcing globally
3) Increased global market share
5
TMS – A global growth story1) Global steel production is growing
RMOG
• The need for raw materials increase as volumes increase
STEEL PRODUCTION BY REGION (MM TONS)
increase• Opportunities to do more
transactions increase as volumes increase
• Opportunities to expand our product offering1,352
1,871
our product offering increase as volumes increase
,
MSG
• Revenues increase as volumes increase
• Cross-selling opportunities increase as volumes increase
• The need for cost-efficient solutions increase as volumes increase
6
Source: CRU
TMS – A global growth story2) Outsourcing services is gaining acceptance worldwide
Why is the outsource services market growing?
Steel industry consolidation
TMS’ ESTIMATES OF OUTSOURCED SERVICES MARKET BY REGION
Steel industry consolidation drives global best practices and increases outsourcing
Global awareness and culturalchange increases outsourcing
Demand for cost efficiencies increases outsourcing
Global volume increases
$2.6 Billion
Maturity of outsourcing by market
2017
Maturity of outsourcing by market
China
NorthAmerica
WesternEurope
EasternEurope
Middle East /
Asia X-China
LatinAmerica
Africa
< More Mature Less Mature >$4.3 Billion
7
$3.8 Billion
TMS – A global growth story 3) Gaining market share
Why is TMS gaining market share?
Broadest portfolio of services Modular approach to customer
penetration
TMS REVENUE AFTER RAW MATERIALS COSTS BY REGION ($MM)
penetration Cross-selling opportunities
Corporate culture focused on safety and customer service Industry-leading safety record
A l th f l ti hi f t 15$549$607 $607
Average length of relationship for top 15 customers – 35 years
Decades of experience Started in 1926 Unmatched record of quality & service
$410$467
$358
$466
$549
Unmatched record of quality & service
Only company with both MSG and RMOG Unique and deep market knowledge Allows us to partner with our customers to Allows us to partner with our customers to
provide unique solutions
Global infrastructure Global platform already well-established Can deploy anywhere in the world we Can deploy anywhere in the world we
choose
8
TMS has the broadest portfolio of services in the industry
Coverage
Raw materials procurement and logistics
Lowest cost liquid steel optimization
Scrap management and preparation
Metal recovery, slag handling, and sales
Material handling
Surface conditioning
David J. Joseph (owned by Nucor) Global
TMS Global
R
Schnitzer Steel Global Sims Metal Management Global
MO
G
Harsco Corporation (Metals & Minerals Segment)
Global
Omnisource(owned by SDI)
U.S. / Regional
M
& Minerals Segment)
Phoenix Services Global Edward C. Levy (Steel Mill Services S t)
Global
MSG
Segment)
Stein U.S. / Regional
9
MSG operational highlights (1Q13 vs 1Q12)
1Q13 1Q12 VarianceNotes:
2013: EBITDA (MSG segment only) $32.7MM $32.4MM $0.3MM
Maintenance capital spend $10.2MM $7.7MM $2.5MM
Growth capital spend (1) $10 3MM $25 5MM ($15 2MM)
Announced largest single contract win in the history of the company providing mill services in Poland
Growth capital spend (1) $10.3MM $25.5MM ($15.2MM)
# of MSG contract wins 3 2 1
Cross-sells 2 0 2
Entered JV agreement to provide mill services to one of Malaysia’s largest steel mills (2)
Pipeline of opportunities
International 2 1 1
Added revenue backlog $266MM $180MM $86MM
Pipeline of opportunities remains strong
2012:
New countries penetrated PolandMalaysia South Africa
2012:
Start-ups are performing as expected
Record number of contract wins
RK
co t act s
Strong year for cross-sells(1) Capital incurred in the period. .(2) Represents a minority interest investment.
10
RMOG operational highlights
Expanded our web of traders worldwide with 36 offices across 5 continents
14.0 million tons of raw materials brokered and managed over the past 12 months
2.6 million tons of raw materials internationally brokered and managed in 2012
# of Offices – Europe
Continued to increase our diversity of commodities traded
Unique risk-minimizing profile
• Primarily back-to-back transactions# of Offices – Europe
2007 2 2013 2# of Offices – North America
2007 12 2013 21• Limited inventory risk
# of Offices – Asia
2007 0 2013 8# of Offices – Middle East /Africa
2007 0 2013 1
TMS INTERNATIONAL INVESTOR PRESENTATION FEBRUARY 2013
0 8# of Offices – Latin America
2007 0 2013 4
0 1
11
Unique business model reduces cyclicality and risk
Average term of contracts: 7 years
Business Model AttributesBusiness Model Strengths
- Average term of contracts: 7 years- Average length of relationship: > 35 years(1)
- Superior contract renewal rate: > 96%
Tiered pricing structure
Long-term contracts with long-term customers
Revenue grows as steel production grows –not linked to steel prices
Minimum monthly fees regardless of volume
Price adjustments based on published i i di
p
Built-in protection from:
1) steel production declines and
2) increases in key input costs price indices
Approximately 80% of cash operating costs variable
2) increases in key input costs
Ability to respond quickly to changing business conditions
Variable maintenance capital expendituresMaintenance capital expenditures tied to equipment utilization
Minimal inventory and commodity price risk Procurement orders matched with customer orders
12
(1) Represents top 10 customers..
Historical financial performance
TOTAL REVENUE REVENUE AFTER RAW MATERIALS COSTS
$1 670
$2,983
$2,031$2,661 $2,526
$411$400
$500
$600
$3,000
$4,000
$410 $468 $358
$466 $549 $60786.4%
81.2%
74.8% 75.1% 75%
100%
$600
$800
$1,670 $1,298
$257
$384
$209
$332$411
$368
$0
$100
$200
$300
$0
$1,000
$2,000
2007 2008 2009 2010 2011 2012
$410 $
51.0% 70.1%
0%
25%
50%
$0
$200
$400
200 2008 2009 2010 2011 2012
ADJUSTED EBITDA DISCRETIONARY CASH PRODUCTION (4)
1 #1 Heavy Melt, American Metal Market
2007 2008 2009 2010 2011 2012
Total Revenue ($MM) Average Scrap Price / Ton2007 2008 2009 2010 2011 2012
Revenue After Raw Materials Costs ($MM)U.S. Steel Industry Capacity Utilization(1) #1 Heavy Melt, American Metal Market
30%$120
(1)
$92 $103 $86$120
$134 $145 $152-$160
22 5% 22 1% 24 0% 25.7% 24.4% 24 0% 20%
30%
40%
50%
$100
$150
$200
$54$67
$70$89 $94
$103
13 0% 14 4%
19.6% 19.0% 17.2% 16.9%
10%
15%
20%
25%
30%
$40
$60
$80
$100
$120
22.5% 22.1% 24.0% 24.4% 24.0%
0%
10%
$0
$50
2007 2008 2009 2010 2011 2012 2013
Adjusted EBITDA ($MM) % Margin(2) 2013 Guidance
13.0% 14.4%
0%
5%
10%
$0
$20
$40
2007 2008 2009 2010 2011 2012
DCP ($MM) % of Revenue After Raw Materials Costs
(2)
(3)
Revenue growth and disciplined cost management driving strong and consistent cash flow13
(3) % of Revenue After Raw Materials Costs( )
(4) Adjusted EBITDA – Maintenance Capital Expenditures
First quarter financial highlights
First QuarterFirst Quarter($MM)
2013 2012 % Change
Revenue After Raw Materials Costs $155.8 $155.9 0%
Adjusted EBITDA $38.3 $36.8 4.0%
Discretionary Cash Flow (1) $28.0 $29.1 (3.8)%
Growth Capital $10.3 $25.5
Leverage Ratio 2.0x 2.1x
(1) Adjusted EBITDA less Maintenance Capital Expenditures.
14
Continued global expansion drives growth
Concluding remarks
Investment highlights Market-leading global industrial services provider Significant growth profile Long-term contracted revenue and variable cost structure Experienced and proven management team Superior financial strength and liquidity
S h fl i d i i h Strong cash flow generation drives earnings growth Recently initiated quarterly dividend of $0.10 per share
Factors driving growthFactors driving growth Global steel production growing Increased demand for outsourcing globally Increased global market share
2013 Adjusted EBITDA guidance of $152 - $160 MM
15
A diAppendix
Case study: Growing with our customers internationally
Customer A is one of the world’s largest and most global steel producers
We proved our international capabilities with this customer in 2006 offering one service at one international mill site
We have grown this relationship by providing cost-efficient and outstanding service and through raw materials sale transactions
We are now on their short list for most new contracts and have further expanded our raw materials business to cover customer’s needs globallybusiness to cover customer s needs globally
Today, we offer a variety of services with an on-site presence at 13 out of 65 sites and 6 countries
Customer A 2006 2007 2008 2009 2010 2011 2012 1Q13
Number of sites 5 6 7 8 9 10 12 13
Number of countries 2 3 4 4 4 4 5 6
16
Case study: Entering the Mexican market
CUSTOMERS First entered the market in 2008 by providing metal recovery services at one site
Today, we have on-site presence at 4 locations in Mexico
Opened a procurement office in Monterrey in 2012 from which we broker and p p ymanage a diverse group of raw materials
Opened a second procurement office in Mexico City in April 2013 to help develop the network further
M i i th 13th l t t l d i th ld ith 18 2 illi t Mexico is the 13th largest steel producer in the world with 18.2 million tons produced in 2012 at 19 mills
TMS growth from:
1 Continued steel production growth1. Continued steel production growth
2. Increased outsourcing by steel producers
3. Increasing market share
Mexico 2008 2009 2010 2011 2012 1Q13Number of Sites 2 2 2 3 4 4Revenue $0 6M $5 0M $9 1M $11 6M $13 7M $4 6M
17
Revenue $0.6M $5.0M $9.1M $11.6M $13.7M $4.6M
TMS enables steel producers to lower costs and generate operational efficiencies
Iron Ore
Pig Iron
70-75%SurfaceSurface
ConditioningConditioning
Coke
Blast FurnaceP d lt i i
As
Nee
ded
for q
ualit
y
Rolling/FinishingRolling/Finishing
Liquid Steel ===to Casting85-87%
On-SiteTransport
Limestone
Produces molten pig iron from iron ore
Basic Oxygen FurnaceProduces molten steel
Rolling/FinishingRolling/FinishingFacilitiesFacilities
Slag
On-SiteTransport
On-SiteTransport
Semi-Finished Material
Raw Materials
Electric Arc FurnaceProduces molten steel
80-85%Finished Finished Goods Goods
Loading Loading Dock/Rail/TruckDock/Rail/TruckLiquid Steel ===to Casting
Sourcing & Logistics
Scrap Steel
80-85%15-20%
AggregateScrap Steel gg g
TMS is embedded in all phases of our customers’ operations – providing mission critical services throughout the steel-making process
18